Author: therawinformant

The Ramsay Health Care Limited (ASX: RHC) share price jumped 3.6% higher last week but is it a good buy in the ASX healthcare sector?

What does Ramsay Health Care do?

Ramsay Health Care is a private healthcare provider with operations across Australia, Europe and Asia. The company was founded in Australia in 1964 and now employs more than 77,000 staff. Ramsay delivers a range of health care from primary care through to highly complex surgery, mental health care and rehabilitation.

What’s been happening in the last few months?

It’s been a big 6 months for the Ramsay Health Care share price and the company’s investors. The ASX healthcare provider was one of the harder hit shares in the February/March bear market, falling 42.2% in the space of a month to a 52-week low of $46.12 per share. 

The coronavirus pandemic spooked investors generally but many sold out of the healthcare sector in particular. Fears of hospitals being overrun with COVID-19 patients had many nervous that Ramsay would struggle to maintain operations in 2020.

This hasn’t proven to be the case, however, and the Ramsay Health Care share price has since bounced back to $66.41 per share. But us long-term investors can’t afford to look exclusively in the rear-vision mirror. So, what else could make Ramsay a good value buy this year?

How strong are the company’s financials?

Ramsay Health Care released its half-year earnings on 27 February for the year ended 31 December 2019. All in all, I thought it was a solid result from the ASX healthcare share. Group revenue climbed 22.5% to $6.3 billion. This was led by strong results from its Australia/Asia, United Kingdom and Continental Europe segments. 

Earnings before interest, tax, depreciation, amortisation and restructuring/rent costs (EBITDAR) surged 17.4% to $1.1 billion. Meanwhile, net profit after tax climbed 3.4% on a like for like basis to $273.6 million. These figures were excluding the contributions of Capio AB, the Swedish healthcare company acquired by Ramsay in 2018.

How does the Ramsay Health Care share price compare to its peers?

Despite a recent recovery, the Ramsay Health Care share price remains down 7.8% in 2020 but is still outperforming the S&P/ASX 200 Index (ASX: XJO). The company’s shares currently trade at a price to earnings (P/E) ratio of 25.7 with a 2.30% dividend yield. 

By itself, that’s not necessarily a bad thing, particularly given the potential for short-term growth in healthcare demand. In terms of its peers, the Healius Ltd (ASX: HLS) share price trades at a P/E of 19.0 with a 1.9% dividend yield.

All in all, I think the Ramsay Health Care share price is probably neither cheap nor overvalued right now. Despite some strong tailwinds, the healthcare industry could easily come under pressure in 2020. I personally don’t think I’ll be buying in unless this ASX health care share falls further.

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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ramsay Health Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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With so many shares to choose from on the ASX, it can be hard to decide which ones to buy.

The good news is that brokers across the country are doing a lot of the hard work for you.

Three top shares that leading brokers have named as buys this week are listed below. Here’s why they are bullish on them:

Cleanaway Waste Management Ltd (ASX: CWY)

According to a note out of Morgan Stanley, its analysts have commenced coverage on this waste management company’s shares with an overweight rating and $2.45 price target. The broker believes that Cleanaway’s vertical integration and large collections business gives it an edge over the competition. And while it sees some short term pain during the pandemic, it is very positive on its long term growth prospects in a lucrative market. It also sees opportunities for consolidation in the industry. I agree with Morgan Stanley and would be a buyer of its shares.

Lovisa Holdings Ltd (ASX: LOV)

Analysts at Morgans have retained their add rating but trimmed the price target on this jewellery retailer’s shares to $8.14. According to the note, the broker wasn’t surprised to see Lovisa’s sales fall heavily in the second half. And although it expects its sales recovery to take time due to its reliance on foot traffic, it still sees a lot of value in its shares at the current level. Especially given its expansion opportunities. I would have to agree with Morgans and feel the Lovisa share price is good value at present.

Reject Shop Ltd (ASX: TRS)

Another note out of Morgan Stanley reveals that its analysts have upgraded this discount retailer’s shares from an underweight rating to an overweight rating and lifted the price target on them materially to $10.00. According to the note, the broker believes Reject Shop has a big opportunity in a fragmented market. And while it acknowledges that its performance has underwhelmed in the past, it is optimistic that its new simplified strategy will be that start of something positive. While I think Morgan Stanley makes some good points, I think the Reject Shop share price looks expensive at over 50x estimated FY 2021 earnings.

More reading

• How to turn $20,000 into over $200,000 in 10 years with ASX shares
• Lovisa share price up 5% as retailer provides business update
• Why Lovisa, PointsBet, Transurban, & WiseTech shares are racing higher
• Lovisa share price on watch after full year sales update
• 3 ASX cleantech shares to consider buying now

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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WAM Leaders Ltd (ASX: WLE) has cemented its place as a top ASX dividend share after announcing a dividend increase for the FY20 final dividend. The WAM Leaders share price is up 5%.

Overview of WAM Leaders

WAM Leaders is a listed investment company (LIC) that actively invests in large cap ASX shares.

It’s operated by Geoff Wilson’s Wilson Asset Management (WAM) with the lead portfolio manager being Matthew Haupt. It was launched in May 2016.

FY20 details

The full report wasn’t released today, but WAM Leaders announced a number of key aspects about its FY20 result.

The ASX dividend share stated that its investment portfolio had significantly outperformed during FY20. In the 12 months to 30 June 2020 the investment portfolio outperformed the S&P/ASX Accumulation Index by 10.4% with a positive return of 2.7%. The benchmark fell 7.7%.

Since inception in May 2016 the WAM Leaders investment portfolio has increased 10.2% per annum, outperforming the index by 3.7% per annum.

WAM Leaders attributed its investment approach as the reason for the outperformance. It focuses on large companies with “compelling fundamentals, a robust macroeconomic thematic and a catalyst to drive the share price higher”.

A 15% dividend increase

The ASX dividend share’s board has declared a fully franked final dividend of 3.25 cents per share, bringing the FY20 full year dividend to 6.5 cents per share. The FY20 annual dividend is 15% bigger than the FY19 total.

WAM Leaders funds its dividend from the investment profits that it makes. Building up the profit reserve is important to pay for future dividends.

At 30 June 2020 the company had an estimated profit reserve of 15.6 cents per share before the payment of the fully franked final dividend of 3.25 cents per share. This represents 2.4 years of dividend coverage at the current level.

The ASX dividend share’s board said it’s committed to paying an increasing stream of fully franked dividends to shareholders as long as it has sufficient profit reserves, franking credits and it makes sense to do so.

Since inception the LIC has paid 16.9 cents per share in fully franked dividends. It has grown its dividend each year since FY17 when it first started paying a dividend.

Top holdings at 30 June 2020

A LIC’s return is dictated by the performance of its holdings.

At the end of FY20 its biggest holdings, in order, were: National Australia Bank Ltd (ASX: NAB), CSL Limited (ASX: CSL), BHP Group Ltd (ASX: BHP), QBE Insurance Group Ltd (ASX: QBE), Westpac Banking Corp (ASX: WBC), Commonwealth Bank of Australia (ASX: CBA), Santos Ltd (ASX: STO), Woolworths Group Ltd (ASX: WOW), Wesfarmers Ltd (ASX: WES), Australia and New Zealand Banking Group (ASX: ANZ), Telstra Corporation Ltd (ASX: TLS) Rio Tinto Limited (ASX: RIO), Star Entertainment Group Ltd (ASX: SGR), Downer EDI Limited (ASX: DOW) and Transurban Group (ASX: TCL).  

Many of the above names are similar to the biggest names on the ASX. It may be noteworthy that NAB is the biggest holding whilst the ANZ position is smaller than Wesfarmers and Woolworths. Star and Downer are two other interesting investments that aren’t in the ASX 20.

Foolish takeaway

The ASX dividend share has been an impressive performer during FY20. Plenty of WAM Leaders’ positions that I mentioned above probably won’t be giving shareholders a dividend increase due to COVID-19. So I think it’s impressive that WAM Leaders is increasing the income for shareholders.

At the current WAM Leaders share price of $1.14 it offers a grossed-up dividend yield of 8.1%.

More reading

• Why Electro Optic Systems, Mayne Pharma, Tyro, & WAM Leaders are racing higher
• 3 of the best ASX dividend shares for income
• 3 dividend shares I’d buy to boost my income
• If I won the lottery I’d buy these 6 ASX shares

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of Transurban Group and Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Phoslock Environmental Technologies Ltd (ASX: PET) share price has surged by 21% today after the water treatment company reported new contracts and project extensions. New project sites have been confirmed in Washington State and New Jersey, and a Brazilian contract has been extended.

What does Phoslock do?

Phoslock specialises in engineering solutions and water treatment products to remediate polluted lakes, rivers, and canals. The company produces a product that removes phosphates and other contaminates from water bodies, and is also safe to use in drinking water reservoirs. Removing excess phosphorus from water inhibits the growth of harmful algal blooms that can have detrimental impacts on aquatic and human life.

What did Phoslock announce?

Phoslock announced that it has been contracted to treat the 240 hectare Kitsap Lake in Washington State and Lake Hopatcong in New Jersey. If Phoslock’s technology is deemed successful and cost-effective at Lake Hopatcong, this could set the precedent for large-scale prevention of harmful algal blooms in other lakes through New Jersey and the United States.

The company highlights that the contracts represent an important opportunity for Phoslock’s technology to be demonstrated in new regions and could result in further business in the US, where water quality issues are receiving more government and public attention.

In Brazil, Phoslock’s contract to treat Lake Pampulha, an important recreational and cultural area, has been renewed for another year. In Rio De Janeiro, an initial application of Phoslock to a major drinking water reservoir of the city has been successful and will be followed up with further treatments in the second half of 2020. The company reports that in the second half of 2020, additional treatments are scheduled for drinking water reservoirs in northern and southern Brazil.

In Europe, Phoslock will be applied to a small alpine lake in the Dolomites in Italy and to a lowland lake in the Netherlands in the final quarter of calendar 2020. Phoslock continues to operate across China with 3 ongoing projects in Yunnan province and continued maintenance work on South Beijing canals.

What is the outlook for Phoslock?

Phislock is seeking to diversify the revenue base of its business. The ability to secure contracts in new regions and new markets is a key pillar of this strategy. The company also remains strongly committed to growing its business in China where its technology is increasingly accepted as best in class for water remediation. Despite travel restrictions, additional resources invested in growth outside China is being reflected in a stronger pipeline of new contracts.

The Phoslock share price is up by 21.43% in today’s trade to sit at $0.34, but still remains more than 50% down since the beginning of 2020.

More reading

• Why AusCann, Phoslock, Kogan, & Village Roadshow are dropping lower

Motley Fool contributor Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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